How Important Is The Lender in a Real Estate Purchase?
More important than you think….
Hi! Sabrina Caton here, Realtor with Berkshire Hathaway HomeServices in Redwood City. I wanted to write my own article today – to shed some light about the importance of the Lender you are working with when purchasing Real Estate in the Bay Area.
If you are a Buyer in the Silicon Valley – then you already know how competitive this market is. If a Buyer wants to be the winning bidder on a home – they pretty much have to write their best offer – Non Contingent. Meaning they’re locked into that contract no matter what. Interest rates rise and they can’t afford their loan? Doesn’t matter if their offer is Non-Contingent. House doesn’t appraise for their offer price? The Buyer better pony up the money or risk possibly losing their good faith deposit – because the offer was Non-Contingent.
As scary as Non-Contingent sounds – it is doable – as long as a Buyer has their ducks in a row – and what I mean by ducks is the Buyer is working with a terrific Realtor and a fantastic Lender, who has already run their credit, taken their application and had the Underwriter review it all before drafting the Pre-Approval Letter.
Often times, at this stage in the process – a Buyer is looking for the best “deal”. Meaning – they will follow the path that gets them the “most money” – or so it is perceived. People may shop a Lender based on their closing costs, the interest rate quoted or because they know them. All fine and well – but we need more! The worst is when a buyer uses any Online Lending Score – that is a horror story for another blog post. (Just take my advice and use a local Lender when buying in the Bay Area.)
When a Buyer is writing a Non-Contingent offer – they are heavily relying on what their Lender has told them. What some Buyers overlook is the followthrough. Did the Lender have the Underwriter (The Bank God as I call them) review the application to ensure they fit into the box? Did the Lender verify employment? Does the Lender know one income earner is on leave? Will their income still be used to qualify for the loan? What happens if their income is not used? What happens in a Buyer takes on new debt? What is a Buyer pays down debt? So many issues can up at any time, it is best to start off with their best foot forward.
The last thing a Buyer needs once they get an offer accepted is surprises in their loan. Like – they don’t have a loan! Large purchases that change their debt to income ratio can turn a Buyer from Pre-Approved to Not Approved. To make things worse – what if a Buyer found this out AFTER their Non-Contingent offer is ACCEPTED?! Well – the Buyer could risk losing their Good Faith Deposit and around here that’s 3% of the purchase price and our purchase prices are at least $1 – $1.5 million dollars. So we’re taking $50,000 here!
Unless a Buyer is buying a home in cash – the home loan is the most critical part of the transaction. Any Sellers Realtor worth their salt will call each Lender on each offer they receive – to ensure the strength and validity of the loan. Because without the loan – there is no sale and NO SELLER is going to risk the most important sale of their lives on “what if’s.”
I could go on and on about the horrors of bad lending. So instead let me leave you with this. When you are starting the journey towards homeownership – the true first step is to apply for a home loan and determine your budget. That entails sitting down and making your own personal home budget. Itemizing what you spend your money on and how much you have left towards the mortgage. Once you’ve applied for a home loan, find a Reatlor your can talk to and trust and sit down and do just that – talk. Each client is a unique situation and therefore requires a different plan. The Caton Team is comprised of myself Sabrina and my partner/mother in law – Susan. Together we have 35 years combined, local real estate experience. Chances are we’ve worked through similar situations as you are in now. Our time is free, our advice is free – put us to work for you.
If you’ve got Real Estate questions – we’ve got answers. Contact the Caton Team when you are considering a purchase or sale of Real Estate.
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